Correlation Between BHP Group and Frontier Transport
Can any of the company-specific risk be diversified away by investing in both BHP Group and Frontier Transport at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining BHP Group and Frontier Transport into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BHP Group Limited and Frontier Transport Holdings, you can compare the effects of market volatilities on BHP Group and Frontier Transport and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in BHP Group with a short position of Frontier Transport. Check out your portfolio center. Please also check ongoing floating volatility patterns of BHP Group and Frontier Transport.
Diversification Opportunities for BHP Group and Frontier Transport
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between BHP and Frontier is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding BHP Group Limited and Frontier Transport Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frontier Transport and BHP Group is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on BHP Group Limited are associated (or correlated) with Frontier Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frontier Transport has no effect on the direction of BHP Group i.e., BHP Group and Frontier Transport go up and down completely randomly.
Pair Corralation between BHP Group and Frontier Transport
Assuming the 90 days trading horizon BHP Group Limited is expected to under-perform the Frontier Transport. But the stock apears to be less risky and, when comparing its historical volatility, BHP Group Limited is 2.48 times less risky than Frontier Transport. The stock trades about -0.01 of its potential returns per unit of risk. The Frontier Transport Holdings is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 72,477 in Frontier Transport Holdings on November 4, 2024 and sell it today you would earn a total of 4,423 from holding Frontier Transport Holdings or generate 6.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.19% |
| Values | Daily Returns |
BHP Group Limited vs. Frontier Transport Holdings
Performance |
| Timeline |
| BHP Group Limited |
| Frontier Transport |
BHP Group and Frontier Transport Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BHP Group and Frontier Transport
The main advantage of trading using opposite BHP Group and Frontier Transport positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BHP Group position performs unexpectedly, Frontier Transport can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Frontier Transport will offset losses from the drop in Frontier Transport's long position.| BHP Group vs. Ascendis Health | BHP Group vs. We Buy Cars | BHP Group vs. CA Sales Holdings | BHP Group vs. Brimstone Investment |
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Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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